Correlation Between Atmos Energy and Vanguard Utilities

Can any of the company-specific risk be diversified away by investing in both Atmos Energy and Vanguard Utilities at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Atmos Energy and Vanguard Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Atmos Energy and Vanguard Utilities Index, you can compare the effects of market volatilities on Atmos Energy and Vanguard Utilities and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Atmos Energy with a short position of Vanguard Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atmos Energy and Vanguard Utilities.

Diversification Opportunities for Atmos Energy and Vanguard Utilities

0.65

Correlation Coefficient

Atmos Energy  Vanguard Utilities

Poor diversification

The 3 months correlation between Atmos and Vanguard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Atmos Energy and Vanguard Utilities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Utilities Index and Atmos Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Atmos Energy are associated (or correlated) with Vanguard Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Utilities Index has no effect on the direction of Atmos Energy i.e., Atmos Energy and Vanguard Utilities go up and down completely randomly.

Pair Corralation between Atmos Energy and Vanguard Utilities

Considering the 90-day investment horizon Atmos Energy is expected to generate 1.11 times more return on investment than Vanguard Utilities. However, Atmos Energy is 1.11 times more volatile than Vanguard Utilities Index. It trades about 0.14 of its potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.04 per unit of risk. If you would invest  13,813  in Atmos Energy on December 29, 2024 and sell it today you would earn a total of  1,433  from holding Atmos Energy or generate 10.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Atmos Energy  vs.  Vanguard Utilities Index

Atmos Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Utilities Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Utilities Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Atmos Energy and Vanguard Utilities

The main advantage of trading using opposite Atmos Energy and Vanguard Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atmos Energy position performs unexpectedly, Vanguard Utilities can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Utilities will offset losses from the drop in Vanguard Utilities' long position.

The idea behind Atmos Energy and Vanguard Utilities Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.